Serving Illinois and Nationwide
Motion 11-Defendant's Motion to Dismiss in Car Accident Case
Memorandum of Law in Support of Universal's Motion to Dismiss
Judge & James, Ltd., Jeanne M. Zeiger, One of the Attorneys for Defendant, Universal Underwriters Insurance, Company.
NOW COMES the Defendant UNIVERSAL UNDERWRITERS INSURANCE COMPANY (“UNIVERSAL), by and through its attorneys, JUDGE & JAMESrLT follows:
INTRODUCTION TO THE ISSUES
FARMERS has filed a Complaint for Declaratory Judgment and Other Relief seeking declarations that UNIVERSAL, under policies of insurance issued to automobile dealerships is obligated to pay for property damage to the dealers' vehicles caused by permissive users of said vehicles who were insured by FARMERS.
However, FARMERS is not entitled to the relief requested because:
Illinois law does not require permissive users to be insured under owner's policies for damage to the owners vehicle; to the contrary, the financial responsibility law requires coverage insuring the oead permissive users for injury to or destruction oP f ( 625 ILCS 5/7-203 5/7-317 (b)(3)) and further specifies that the requirements shall not apply to the driver or owner of a vehicle involved in an accident in which no damage was caused to the person or property of any one other than such driver or owner (625 ICS 5/7-202(8)).
users are not insureds under the terms of UNIVERSAL's liability Coverage Part.
The coverage sought is specifically excluded under UNIVERSA liability Coverage Part.
Permissive users are not insureds under the terms of UNIVERSA's physical damage Coverage Part.
1. Illinois law does not requrere permissive users to peinsured under owner's oicies for damage to the owner's vehicle.
In State Farm Mutual Auto Ins. Co. v. Universal Underwriters Group (1998) 182 1.2d 240 695 N.E.2d 848 . the Illinois Supreme Court held that a permissive user of an automobile owned by an auto dealership was an insured under the dealership's auto liability policy in a case involving personal injuries to occupants of another vehicle. The Supreme Court reasoned that the Mandatory Insurance Act ( 625 ILCS 5/7-601 (a)) requires vehicles to be covered by a liability insurance policy” and that the definitions in § 7-317 of the Financial Responsibility Act ( 625 ILCS 5/7-317 ) apply throughout that code.
However, State Farm v. Universal, supra, involved personal injuries to the occupants of another vehicle. In contrast, the instant case involves only property damage to the dealer's vehicle, and the provisions of the Mandatory Insurance Act and the Financial Responsibility Act do not require permissive users to be insureds under the owners policy where the only damage is to the owner's vehicle.
The Mandatory Insurance Act 625 LCS 5/7-601 (a) requires the policy to be issued in amounts set for bodily injury or death and for destruction of property under § 7-203 of the Vehicle Code. Section 7-203 (625 LCS 5/7-203) provides as follows:
“5/7-203. Requirements as to policy or bond.
5/7-203. Requirements as to policy or bond. No such policy or bond referred to in Section 7-202 shall be effective under this Section unless issued by an insurance company... authorized to do business in this State... every such policy... is subject if the motor vehicle accident has resulted in bodily or death, to a limit... of not less than $20,000 because of bodily injury to or death of any one person in any one motor vehicle accident..., and, if the motor vehicle accident has resulted in injury to or destruction of property, to a limit of not less than $15,000 because of injury to or destruction of property of others in any one motor vehicle accident.” (Emphasis added.)
Section 7-202, to which the above-quoted provision refers further specifies exceptions to those requirements as follows:
5/7-202. Exceptions to requirements of security.
5/7-202. Exceptions to requirements of security. (a) The requirements... shall not apply:
(8) To the driver or the owner of a vehicle involved in a motor vehicle accident wherein no injury or damage was caused to the person or property of any one other than such driver or owner;”
Accordingly, the Financial Responsibility Act specifically provides that the requirements regarding insurance coverage do not apply to the driver or owner of a vehicle where, as here, the accident has resulted in no injury except to the property of the owner.
Section 7-317 (b)(3) of the Financial Responsibility Act ( 625 ILCS 5/7-317 (b)(3)). upon which the llinois Supreme Court relied in State Farm v. Universal, ooc in further bears out the legislative intent that permissive users are not required to be insured under an owners policy for damage to the owners vehicle. Section 317(b)(3) defining an owners policy, states as folows
5/7-317. “Motor Vehicle Liability Policy” defined....
(b) Owners Policy - Such owners policy of liability insurance:
(3) Shall insure ever named insured and every other person using or responsible for the use of any motor vehicle owned by the named insured and used by such other person with the express or implied permission of the named insure to the extent and aggregate amount... of 15,000 for damage to property of others as a result of any one accident.” (Emphasis added.)
The Financial Responsibility Law clearly provides that a motor vehicle liability policy shall insure the owner and permissive users for damage to “property of others” Accordingly, under the statute's plain and unambiguous terms, it does not require coverage for damage to the property of the named insured.
Black's Law Dictionary defines the term “other” as follows:
“Other. Different or distinct from that already mentioned; additional, or further...” Black's Law Dictionary (5th Ed. 1979).
Similarly. Webster's New World Dictionary (1979) defines the term “other” as follows:
“Other... 1. being the remaining one or ones [Bill and the other boy(s)] 2. different or distinct from that of those implied [use your other foot] 3. Additional [he has no other coat]...”
Under the plain and unambiguous terms of the statute the definition of an owners policy requires such a policy to insure the named insured and any permissive users for damage to “property of others” and thus specifies by its own terms that the policy need not insure permissive users for damage to the owner's property.
In construing a statute a court should evaluate the statute as a whole and give undefined words their ordinary and popularly understood meaning, reading the relevant language within the context of the entire provision of which it forms an integral part. Texaco-Cities Service Pipeline Co. v. McGaw (1998) 182 Ill.2d 262, 269, 695 N.E.2d 481, 485; Garner v. City of Chicago (1st Dist. 2001) 319 III.App.3d 255, 263, 744 N.E.2d 867, 872 .
Here, the ordinary and popular meaning of the term “property of others,” following the requirement that the policy insure the named insured and permissive users, demonstrates that the legislature intended that the policy need not insure the property of the named insured.
Moreover, courts should evaluate the statute as a whole and construe it so that no term is rendered superfluous or meaningless. Texaco-Cities Service Pipeline Co. v. McGaw (1998) 182 Il.2d 262, 269, 695 N.E.2d 481, 485 . Acceptance of FARMERS' position would read the words “of others” out of the statute and render those terms superfluous or meaningless. If the legislature had intended a liability policy to insure for damage to the property of the owner or of any person using it with the permission of the named insured, the legislature need not have included the phrase “of others” but would merely have required a limit of 515,000 for damage to “property”; instead, the legislature specified that the policy shall insure the named insured and permissive users for damage to property “of others.
In addition, § 7-202(8) ( 625 ILCS 5/7-202 (8)) [the requirements shall not apply to the driver of owner of a vehicle involved in an accident where no damage is caused to the person or properly of any one other than such driver or owner] addresses the same subject matter as § 37(b)(3). Accordingly, the statutes should be interpreted as in pari materia and an interpretation which gives effect to both provisions must be adopted. Anderson v. Chicago Board of Election Commissioners (1st Dist. 1996) 284 IIl.App.3d 832, 672 N.E.2d 1 259, 1261 .
Accordingly, the Financial Responsibility law, by requiring coverage for damage to property of others does not require coverage for damage to the owner's vehicle. Accord, Fritz-Pontiac-Cadillac-Buick v. Goforth (S.C. v. Goforth (S.C. 1994) 440 S.E.2d 367 [mandatory insurance statute requiring minimum of $5,000 for injury to or destruction of “properly of others' does not require auto dealership's policy to provide coverage for damage to car caused by customer's test drive; “propery of others” refers to property of individuals other than insured dealership]; Western Motor Co., Inc. v. Koehn (Kan. 1988) 748 P2d 851 [Kansas law does not require the owner of a vehicle to insure against damage to that vehicle hence auto dealership insurance policy insured by UNIVERSAL did not include test driver as an insured.]
The Illinois Supreme Court recently noted that the principle purpose of mandatory automobile liability insurance is to protect the public by securing payment of their damages. State Farm Mutual Auto Ins. Co. v. Smith (No. 90388, filed Sept. 20, 2001) __.2d ___ N.E.2d ____. Hence, the legislature has required insurance covering owners and permissive users for damage to property of others. However, CQ17 these polic considerations of protecting the public are absent where, aset it is the property of the owner/policyholder which has been damaged. See McDonald v. Hardware Mutual Casualty Co. (N.H. 1964) 202 A2d 489 [a permissive user is not covered under a dealers garage policy for damage to the owners auto; the main purpose of the Financial Responsibility Law is to fumish coverage for innocent persons who may be injured and excluding coverage for damage caused by a negligent operator to property in his charge would not detract from this purpose.]
Accordingly, Illinois law does not require permissive users to be insured under an owner's policy for damage to the owner's vehicle. To the contrary, the Financial Responsibility Law requires coverage insuring the owner and permissive users only for injury to “property of others” and further specifies that the requirements do not apply to the driver or owner of a vehicle involved in an accident, where, as here, there is no damage to property other than that of the owner.
2. Permissive users are not insured under the terms of UNIVERSAL's garage liability Coverage Part for damage to the owner's vehicle.
The policies issued by UNIVERSAL to the dealers consist of multiple types of coverage. According to the first page of each policy, the policy insures “only those coverages and property shown in the declarations made a part of this policy.” (Exhibits A & B) In addition, the preamble to each policy states that each Coverage Part is a separate contract of insurance. (Exhibits A & B at p. 4)
The policies issued by UNIVERSAL to Sierra Motor Mall and Geiser Ford, Inc., each consist of separate contracts of insurance for liability under the Garage Unicover Coverage Part 500 (Exhibits A & B at pp. 4, 32) and physical damage coverage under the Auto Inventory Unicover Coverage Part 300 (Exhibits A & at .9)
The garage liability Coverage Part of UNIVERSAL's policies defines who is an insured as follows:
“WHO IS AN INSURED...
With respect to the AUTO HAZARD:
(2) Any of YOUR partners, paid employees, directors, stockholders, executor officers, a member of their household or a member of YOUR household, while using an AUTO covered by this Coverage Part, or when legally responsible for its use. The actual use of the AUTO must be by YOU or within the scope of YOUR permission;
(3) Any CONTRACT DRIVER;
(4) Any other person or organization required by law to be an INSURED while using an AUTO covered by this Coverage Part within the scope of YOUR permission.” (Exhibits A & B at p. 35.)
FARMERS' cites subsection 4 above in claiming that Mark Wilder, Cecilia Butler and Carol Jones qualify as insureds under the policy. However, as discussed in section 1 above, these parties are not “required by law” to be insured with respect to damage to the owner's auto. Where Illinois law does not require these parties to be insured for the alleged accidents which solely involved injury to the owners' vehicles, these parties simply do not qualify as insureds under the liability Coverage Part of UNIVERSAL's policy.
Moreover, under a motor vehicle liability policy issued to the owner, damage to the owners vehicle would not be aliability, or third-party coverage. Rather, damage to the owners/poicyholdes vehicle is a first-party or property coverage payable directly to the policy holder. See Holme 's Appleman on Insu., Inc. v. Koehn (Kan. 1988) 748 P2d 851 quoting Aetna Cas. & Surety Co. v. Penn. Nat. Mut. Cas. Ins. Co. (N.C. 1986) 341 S.E.2d 548 [collision insurance is basically a contract of indemnity; a permissive user who has no equitable or economic interest n the vehicle has no insurable interest with respect to collision coverage.]
Illinois has expressed its public policy in its statutes. As discussed above, there is no public policy in Illinois which requires permissive users to be insured under an owner's policy for damage to the owner's vehicle. Moreover, there is no public policy in Illinois which would require greater coverage for a permissive user than is afforded to the named insured. See Western Motor Co., Inc. v. Koeh (Kan. 1988) 748 P2d 851 [where the statute does not require the owner of a vehicle to insure against damage to that vehicle, it would be inconsistent to hold that the owner must provide insurance against damage to the vehicle if it is damaged while being operated by a permissive user where there would be no such coverage for the named insured.]
Accordingly, permissive users are not insureds under the liability coverage of UNIVEVERSALs policies for damage to the owners' vehicles.
3. The coverage sought is specifically excluded under UNIVERSAL' policy.
Even if the coverage sought could be construed as liability coverage with respect to permissive users, UNIVERSAL's garage liability Coverage Part specifically excludes such injury as follows:
“EXCLUSIONS - This insurance does not apply to:
(j) INJURY or COVERED POLLUTION DAMAGES to:
(1) Personal property, including AUTOS owned by, rented or ased to. used by, in the care, custod or C control of, or being transported by the INSURED.” (Exhibits A & B at p. 35, 38.)
Similar exclusions have been upheld by Illinois courts. State Farm Fire & Cas. Co. v. Kohen (3d Dist. 1981) 98 Ill.App.3d 860, 424 N.E.2d 992; Western States Mutual Ins. Co. v. Standard Mutual Ins. Co. (2d Dist. 1960) 26 III.App.2d 378, 167 N.E.2d 833 .
In State Farm Fire & Casualty Co. v. Kohen (3d Dist. 1981) 98 III.App.3d 860, 862, 424 N.E.2d 992, 994, the court noted that the exclusion “is commonly found in most if not all.” auto liability insurance policies and that the exposure excluded may be separately insured under physical damage or collision coverage as follows:
“Typically, liability coverage includes damage to property owned by someone other than the insured. The purpose of the clause in issue is to exclude from liability coverage damage to property of the insured. The justification for the exclusion for this kind of exposure from automobile liability insurance was given in Parry v. Maryland Casualty Co. (1930) 228 App. Div. 393, 395, 240 N.Y.S. 105, 107 The limitations relate to property in which the insured has either a general interest or a special interest. As to such property both frequency of accident and the opportunities for fraud create a high hazard and make the risk undesirable, at least at a rate charged for the ordinary coverage.' The exposure excluded in the liability coverage may be separately insured under physical damage (collision) coverage.” 98 Ill.App.3d at 862-63 .
The court in State Farm v. Kohen, supra, 98 IIl.App.3d at 863-864, 424 N.E.2d at 994 . further noted that the exclusion has been considered in many jurisdictions and has never been found to be ambiguous or contrary to public policy and quoted the Minnesota Supreme Court as follows:
“The Minnesota Supreme Court said of a similar exclusion of property damage in charge of the insured: It is clear that (the exclusion) was intended to afford to one who was driving an automobile which he did not own the sam 00191 coverage as would be afforded to an owner...” ( 424 N.E.2d at 994 .)
Similarly, here, the exclusion is intended to afford permissive users (where local law requires said persons to be insured) the same coverage as would be afforded the owner, namely, no liability coverage for damage to his own vehicle.
This is in keeping with Illinois' financial responsibility laws which do not require such coverage for permissive users when the only injury is to the owner's vehicle. (See section 1 above.) Hence, there can be no public policy bar to enforcement of this exclusion not only because it is in line with the statutory mandate, but also because the principle purpose of mandatory automobile liability insurance, as stated by the Illinois Supreme Court, is to protect the public, (State Farm v. Smith (No. 90388. filed Sept. 20, 2001) ___ .2d ___, N.E.2d ). Such public policy considerations are absent where it is the owners property which has been damaged. Accord see McDonald v. Hardware Mutual Casualty Co. (N.H. 1964) 202 A2d 489 [the main purpose of the financial responsibility is to furnish coverage for innocent persons who may be injured-excluding coverage for damage caused by a permissive user to property in his charge would not detract from this purpose; hence, where permissive user of garage's auto damaged it. auto was in charge of the insured within the exclusionary clause and the driver's collision coverage covered the accident.]
Accordingly, the coverage sought is excluded under the plain and unambiguous terms of UNIVERSAL's liability coverage and there is no public policy bar to enforcement of this exclusion.
4. Permissive users are not insured under the physical damage Coverage Part of UNIVERSAL's policies.
UNIVERSAL's policies are written to provide coverage to its vehicles as a first-party coverage under the Auto Inventory Physical Damage Coverage Part 300 (Exhibits A & B at p. 9). That section specifies who is an insured as follows:
“WHO IS AN INSURED - With respect to LOSS under this Coverage Part:
(2) YOUR partners, paid employees, directors, executive officers, and stockholders while acting within the scope of their duties as such with respect to a CUSTOMER'S AUTO.” (Exhibits A & B at p. 10.)
Permissive users simply do not come within the definition of “who is an insured” under UNIVERSAL's physical damage coverage.
That coverage further provides as follows:
“NO BENEFIT TO BAILEE - This insurance will not benefit, directly or indirectly, any carrier or bailee.” (Exhibits A & B at p. 14.)
The facts alleged by FARMERS regarding the underlying claims constitute constructive bailments in that the dealers delivered vehicles to the drivers who accepted the vehicles for some purpose other than that of obtaining ownership and who returned the property in damaged condition. Fuller 's Car Wash, Inc. v. Liberty Mutual Ins. Co. (2d Dist. 1998) 298 Ill.App.3d 167, 173, 698 N.E.2d 237, 242; AmericanAmbassador Cas. Co. v. City of Chicago (1st Dist. 1990) 205 Ill.App.3d 879, 881-82, 563 N.E.2d 882, 884: see Couch on Insurance 3d § 156:91 (1998) [customer using dealerships vehicle was not an insured under dealership's physical damage coverage.] Here, under the plain terms of the physical damage Coverage Part, there is no coverage under UNIVERSALs policies for permissive users or their insurers.
Moreover, there is no statutory requirement in Illinois that auto policies include physical damage coverage or that permissive users be insured for physical damage coverage when the policy does provide such coverage. Rather, physical damage coverage is an optional firstparty coverage of indemnity to the owner and a permissive user has no insurable interest in said coverage. See Western Motor Co., Inc. v. Koehn (Kan. 1988) 748P2d851.
UNIVERSAL's policy language distinguishes the instant case from Western States Mutual Jns Co. v Standard Mutual Ins. Co. (2d Dist. 1960) 26 Il.App.2d 378 . 167 N.E.2d 833 . In that case, the policy itself defined permissive users as insureds for property damage liability coverage and contained no definition of who is an insured with respect to collision coverage. Thus, the court in Western States v. Standard, upheld the application of an exclusion similar to that in UNIVERSAL's liability coverage to preclude liability coverage for the permissive user but held that the owner's insurer could not subrogate against the permissive user for its collision coverage payments because the permissive user was an insured under the policy.
Here. UNIVERSAL's policy provisions are different in that the liability coverage does not include permissive users as insureds, and the collision Coverage Part of UNIVERSAL's policy specifically defines insureds so as not to include permissive users. Moreover, the preamble to UNIVERSAL's policy specifically states that each Coverage Part constitutes a separate contract of insurance.
Permissive users are simply not insureds under either UNIVERSAL's liability or physical damage Coverage Parts.Hence, UNIVERSAL cannot be subrogating against its own insured.
UNIVERSAL's subrogation rights arise out of its payment to the policyholder under its physical damage coverage and permissive users are not insureds under that coverage nor are they insured under UNIVERSAL's liability coverage.See 10A George J. Couch et al. Couch on Insurance § 42.223 (2d ed. 1982) [person to whom the insured under an automobile collision policy loans the automobile is not an insured with respect to collision insurance and the collision insurer can maintain a subrogation action against such person for collision loss]; Fritz-Pontiac-Cadillac-Buick v. Goforth (S.C. 1994) 440 S.E.2d 367 [under the language of UNiVERSAL's policy, test driver is not an insured under auto dealership's policy; statute requiring property damagecoverage for “property of others” refers to property of individuals other than the named insured dealership; because test driver is not covered under the plain terms of the policy UNIVERSAL may be subrogated to the dealers claim for damages]; Western Motor Co., Inc. v. Koehn (Kan. 1988) 748 P2d 851 [under UNIVERSAL's policy language and Kansas law which does not requir a vehicle owner to insure against damage to that vehicle, test driver is not an insured under dealerships policy and insurer could assert subrogation claim against him]
Accordingly, permissive users are not insureds under the physical damage coverage of UNIVERSAL's policies nor are they insureds under the liability coverage of said policies. Hence, UNIVERSAL may properly assert its subrogation rights against the permissive users.
5. Plaintiff's claim for statutory penalties, costs, interest and attorneys fees is inappropriate.
In addition to declaratory relief, FARMERS seeks a judgment in the form of a penalty of $25,000 for each claim plus costs, interest and attorneys fees plus an award of its costs incurred herein.
However, this request is inappropriate where UNIVERSAL has merely asserted a legitimate policy defense based upon the express wording of the policy and llinois statutory and case law. Scudella v. Illinois Farmers Ins. Co. (1988) 174 Ill.App.3d 245 . 252, 528 N.E.2d 218 . Under the express wording of UNIVERSAL's policy, as well as Illinois statutory and case law, permissive users are simply not insureds under UNIVERSAL policy.
WHEREFORE, Defendant UNIVERSAL UNDERWRITERS INSURANCE COMPANY respectfully requests this Honorable Court to dismiss Plaintiffs Complaint for Declarator Judgment and Other Relief with prejudice, to deny Plaintiffs request for penalties, costs, interest and attorneys fees, and to further enter a specific written finding that no just cause exists to delay either enforcement or appeal or both from said order or judgment of dismissal.